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July 16, 2014

Sewer cost could be cut to $9,300 per home

As published in The Erin AdvocateLimits on the Town’s borrowing capacity mean that a traditional sewer system will require at least 60% of the capital costs to be covered by senior government grants, according to an economist’s report to councillors as part of the Servicing and Settlement Master Plan (SSMP).Gary Scanlon of Watson & Associates Economists Ltd. said two-thirds (66.6%) grant coverage on a $58.5 million system would leave the Town some flexibility for other borrowing, and reduce the capital cost per household to about $9,300 for sewers in Hillsburgh and Erin village. At a council workshop on July 9, Scanlon said there would be other costs as well, including water improvements, several thousand dollars for each sewer hook-up depending on the property and the decommissioning of septic systems. There would also be a regular sewer bill based on usage, which he estimated at $400 per year based on a fully built-out system (costing $900,000 per year to operate).“The Town needs to pursue grants to reduce the overall impact on property owners – also to be able to remain within the Town’s debt capacity limits,” said Scanlon.An earlier rough estimate by consultant B.M. Ross had put the cost of a traditional sewer system (including a treatment plant) at $65 million. More detailed analysis now puts it at $58.5 million. That cost would be divided among 2,288 residential units (or equivalents for larger buildings like schools). It includes 1,263 units in Erin village, 525 in Hillsburgh and an expected 500 new homes.The final cost shares vary slightly based on where the new homes are built (Erin only, Hillsburgh only, or split between the two), but it is about $28,000 for each existing home. A two-thirds grant brings that down to $9,333.Residents would have the option of receiving a low-interest municipal loan that could spread payments over 15-20 years. A 20-year loan for the wastewater capital cost, after a two-thirds grant, would cost a homeowner $649 per year. Residents with newer septic systems could be given a grace period – they would have to start paying the capital costs immediately, but might delay hook-up for a few years.Provincial regulations state that municipalities can only borrow to the limit that debt payments equal 25% of revenues. The most new debt that Erin could handle is $25 million, based on a 20-year term. With the share for existing residents at about $50 million for sewers, plus $2.8 million for water, a 60% grant would bring that down to $21.1 million, leaving $3.9 million in debt capacity for other needs. A 66% grant would bring it down to $18 million, leaving $7 million in debt capacity. Grants can reduce costs for both growth and existing households.“If lesser levels of grants can be obtained, the servicing may be able to go ahead, but on a staged basis, if the treatment plant could be done in stages,” said Scanlon.The cost estimates are based on requiring all urban homeowners to connect to municipal water and sewers – currently 110 in Erin village and 230 in Hillsburgh are on their own wells.The estimates are also based on developers agreeing, through negotiation, to pay their development charges (about $9 million for sewers and $3 million for water) at the start of the process, instead of when they actually build the homes. Developers are also sometimes willing to take on an additional portion of the cost, said Scanlon. The current SSMP process is about general concepts and direction, with no final decision on constructing a sewer system to be made for a couple of years. The final SSMP report is expected to be available on August 12, with a full public meeting on September 2. Council wants to finish the SSMP before the municipal election nomination day, September 12. That means voting on whether to proceed with the next phase of environmental assessment, to study details of various wastewater systems. Some options, such as small-bore sewers, would be less costly to build, and less disruptive to the road system, compared to traditional sewers.“We have to assess less expensive technologies, and this should come out of a performance-based environmental assessment,” said resident Roy Val. Performance-based involves a bidding process, leading to a partnership with a private firm that would share the risks of a sewer system. The Town would retain approval authority, but not have to arrange financing or pay costs up-front. Competitors would research options, with the successful firm authorized to arrange financing (government and private), design and build the system, then run it at a profit. Residents would be billed through the Town.The Municipal Act empowers the Town to impose sewer charges on specific areas, and this is not appealable to the Ontario Municipal Board. Rural residents would not be serviced, and not be charged. There has been discussion about requiring that local septic tank pump-outs (septage) be delivered to the Erin sewage plant. This would provide more revenue to the system and could be at a lower cost to rural residents than having the waste transported longer distances.The sewer system share for each newly-built home would be lower than for existing homes, in the $16,000 to $18,000 range, because it does not include the local sewer mains that would be installed in a subdivision by a developer at their own additional cost.The greatest share of water system improvements (especially new wells) would be paid through new homes – $7,798 each with growth split between Hillsburgh and Erin village. But there would be a charge of $984 for existing connected homes, and $4,550 for existing unconnected homes.

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Here is the estimated capital cost breakdown provided to Town
Council at the SSMP Workshop for a traditional, gravity-based sewer system. It
does not include hook-up costs, water system improvements or construction of
local sewer mains in new subdivisions.